Warren: GE Pays No Taxes

Massachusetts Senate candidate Elizabeth Warren evoked corporate tax punching bag General Electric Co. in a recent ad, claiming the corporate giant pays “nothing – zero – in taxes” to make a point about misplaced values. But that’s not accurate.

We should preface this by saying that we are wading into a heated media debate about the amount of taxes paid by GE, and the most crucial number — the amount paid in corporate income tax — is unknown.

This much is certain: As the New York Times and others have well documented, GE has employed a number of aggressive (and legal) strategies that have greatly reduced the company’s corporate tax burden.

But the claim that it pays no federal income tax at all is disputed by GE. Moreover, aside from corporate income taxes, GE pays payroll taxes, state taxes and local taxes. So Warren’s blanket assertion that GE pays “nothing – zero – in taxes” is simply inaccurate.

Warren, a Democrat running against incumbent Republican Massachusetts Sen. Scott Brown, says in her ad, “Today, Washington lets big corporations like GE pay nothing – zero – in taxes, while kids are left drowning in debt to get an education. This isn’t about economics; it’s about our values.”

According to the New York Times story, GE reported U.S. profits of $5.1 billion in 2010 (and $14.2 billion worldwide). “Its American tax bill?” asked the Times. “None. In fact, G.E. claimed a tax benefit of $3.2 billion.” The company accomplished this, the story said, due to “an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”

On April 4, 2011, Pro Publica and Fortuneco-published their own analysis of GE’s taxes and concluded that the New York Times had left the mistaken impression that GE got a $3.2 billion tax refund, when, in fact, it did not. The company also paid U.S. income taxes in 2010, the authors wrote.

Pro Publica/Fortune, April 4, 2011: Did GE pay U.S. income taxes in 2010? Yes, it paid estimated taxes for 2010, and also made payments for previous years. Think of it as your having paid withholding taxes on your salary in 2010, and sending the IRS a check on April 15, 2010, covering your balance owed for 2009.

GE chief spokesman Gary Sheffer told Pro Publica: “We expect to have a small U.S. income tax liability for 2010.” How much? The company wouldn’t say.

We emailed one of the story’s authors, Jeff Gerth of Pro Publica, a former investigative journalist with the New York Times, and asked him about Warren’s claim. Here’s what he wrote back:

Gerth, April 23: The fact is that GE’s tax returns are not public. The basis for the statement that they paid a small amount of taxes is the company’s official statements to the press. The basis for the NYT’s original report that they paid no taxes was a reading of their financial statements, which are not the same as their tax returns. I don’t know where Warren gets her facts from.

Andrew Williams, a spokesman for GE, told us via email that “there is a lot of misinformation out there about what we pay in taxes, but at the most basic level: we pay taxes and we did not get a refund.”

According to Williams, GE paid $1 billion in federal, state and local taxes in the U.S. for 2010. He declined to say how much of that was for federal income taxes, except to say that some of it was.

Williams also pointed to a company press release, from April 17, on taxes paid by GE. According to that release, GE paid an effective global tax rate of 7 percent in 2010, counting money paid “to the IRS and foreign counterparts” in other nations. That rate was particularly low, Williams said, because the company lost $32 billion in its financial business during the global financial crisis.

According to the company release, GE’s effective tax rate jumped to 29 percent in 2011. The company paid $2.9 billion in worldwide corporate income tax in 2011, and another $1 billion in other U.S. taxes that year, the release states.

We asked Williams how much of the $2.9 billion in worldwide corporate taxes was paid to the U.S. government, and how much the company paid in U.S. corporate income taxes in 2010. “Like virtually all other companies, we do not break out tax data on a country by country basis,” Williams said. “Instead, we disclose our worldwide payments and rates. However, we did pay federal income taxes.”

We’re not going to weigh in on Warren’s larger point about whether corporations like GE aren’t paying their fair share. That’s up to voters to decide. Again, the company has clearly been aggressive in reducing its tax burden through various tax credits and deductions created by the federal government (one example is clean energy incentives). It also has been creative in moving a good deal of its profits offshore. But Warren overreached with her claim that GE pays “zero” in taxes. The company does pay payroll taxes and local and state taxes. And GE says it also pays federal income taxes. How much? We don’t know, and GE isn’t saying. Nor is it required to.